Nextdoor Holdings, Inc. (NXDR) Q3 2025 Earnings Call Transcript

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Overview

The earnings call reveals strong financial performance with revenue growth and improved EBITDA margins. Despite reduced ad load, self-serve revenue grew significantly, indicating effective monetization strategies. The company’s strong liquidity position and strategic restructuring efforts are positive indicators. Q&A insights highlight management's focus on enhancing user engagement and programmatic capabilities, which are promising for long-term growth. Although there are concerns about reduced user acquisition and ad load, the overall sentiment remains positive due to financial strength and strategic initiatives.

Key Financial Performance

Revenue $69 million, up 5% year-over-year, driven by strong demand from self-serve advertisers and improvements in ARPU (up 8% year-over-year) despite reduced ad load.

Self-serve revenue Grew 33% year-over-year, making up roughly 60% of total revenue, attributed to higher click-through rates, lower cost per click, and increased active customer base and advertiser spend.

Platform WAU (Weekly Active Users) $21.6 million, a modest sequential decline due to an intentional decision to reduce notification and email volumes, focusing on engagement quality over quantity.

GAAP net loss $13 million for Q3, reflecting ongoing operational costs.

Adjusted EBITDA $4 million, a positive 6% margin, representing an 8-point year-over-year improvement, driven by strong revenue performance and operational efficiency.

Revenue per employee Increased 21% year-to-date, indicating improved productivity.

Cash, cash equivalents, and marketable securities $403 million at quarter end, with 0 debt, showcasing a strong liquidity position.

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Operating Highlights

New ad formats and AI integration: Introduction of new ad formats and deeper AI integration expected to improve monetization.

Local alert system: Real-time local alert system for high-impact events like fires, weather, and outages.

Local publishers and news content: Over 4,000 local publishers live on the platform; local news accounts for 7% of total feed content.

Real-time updates: Integration of real-time traffic, road updates, and earthquake alerts from U.S. Geological Survey.

Self-serve advertising growth: Self-serve revenue grew 33% year-over-year, making up 60% of total revenue.

Advertiser performance: Higher click-through rates and lower cost per click observed.

Active customer base: Growth in active customer base and net new advertiser spend.

Revenue growth: Q3 revenue reached $69 million, up 5% year-over-year.

Adjusted EBITDA: Positive Q3 adjusted EBITDA of $4 million, a 6% margin.

Revenue per employee: Increased 21% year-to-date.

Cash reserves: $403 million in cash, cash equivalents, and marketable securities with zero debt.

User engagement strategy: Intentional reduction in notifications and emails to focus on engagement quality over quantity.

Content ecosystem: Plans to modernize recommendations ecosystem to enhance trust and utility for neighbors and businesses.

Leadership update: Appointment of Indrajit Ponnambalam as CFO effective December 1, 2025.

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Risk or Challenges

Platform WAU Decline: Platform WAU (Weekly Active Users) experienced a modest sequential decline due to an intentional decision to reduce notification and email volumes. This focus on engagement quality over quantity may lead to further fluctuations in user activity, potentially impacting user retention and engagement metrics.

Reduced Ad Load: The company does not plan to increase ad load in Q4 or into 2026, prioritizing user experience over short-term revenue growth. This decision could limit revenue growth potential in the near term.

Workforce Reduction: Recent workforce reductions are expected to yield cost savings, but they may also pose risks to operational efficiency and employee morale, potentially impacting long-term productivity.

Intentional Reduction in User Acquisition Efforts: The company plans to intentionally reduce new user acquisition efforts during Q4, which could slow the growth of the user base and impact future revenue opportunities.

Economic Uncertainty: The company faces economic uncertainties that could impact advertiser spending and overall revenue growth, as highlighted in the forward-looking statements disclaimer.

Seasonality Impact: Q4 revenue guidance reflects normal seasonality, which may result in lower revenue compared to Q3, potentially affecting financial performance.

Strategic Execution Risks: The company is entering a new phase of transformation, focusing on bold initiatives like reinventing the recommendations ecosystem and increasing high-quality content. These efforts carry execution risks and may not yield immediate results, impacting short-term performance.

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Guidance & Outlook

Q4 2025 Revenue and Adjusted EBITDA: The company expects Q4 revenue between $67 million and $68 million and adjusted EBITDA in a range between $3.5 million and $4.5 million. This reflects normal seasonality and a full quarter of savings from recent workforce reductions, partially offset by incremental platform investments.

Full Year 2025 Revenue and Adjusted EBITDA: The company projects full year 2025 revenue growth of 3% to 4% and an approximately $3 million adjusted EBITDA loss.

Full Year 2026 Adjusted EBITDA: The company reaffirms its expectation for full year adjusted EBITDA breakeven in 2026.

Ad Load and User Acquisition Strategy: The company does not plan to increase ad load in Q4 2025 or into 2026, prioritizing user experience. Additionally, it expects to intentionally reduce new user acquisition efforts during Q4 2025.

Product and Platform Enhancements: The company plans to introduce new ad formats and deeper AI integration over the coming months to improve monetization. It also aims to modernize its recommendations ecosystem to enhance engagement and support local businesses.

Content and Engagement Strategy: The company will focus on increasing high-quality content and distributing it effectively to the right users at the right times. It aims to create a stronger neighborhood ecosystem grounded in a vibrant, useful, and trusted local community.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:Insights into the underlying customer engagement, specifically the depth of engagement metric, 4 months after the launch of the new Nextdoor.

A:The new Nextdoor has made progress with news content approaching 10% of the newsfeed. Alerts are essential and metrics reflect their importance. Recommendations are the next focus area due to their potential. The platform aims to increase high-quality content to drive deeper engagement, as more relevant content leads to better user experiences.

Q:Update on user acquisition strategies evolving into 2026, considering notification changes in 3Q and planned pullback in new user acquisition for 4Q.

A:The focus is on creating a better first-time user experience (cold start). Current efforts aim to differentiate the experience for new users compared to long-term users. Aggressive new user acquisition is on hold to prioritize long-term value creation over short-term metrics.

Q:Source of additional content for Nextdoor: user-generated content or third-party publisher partners?

A:Nextdoor has 4,000 publishers providing news content and plans to integrate more third-party alerts. However, the primary focus is on increasing user-generated content, particularly neighbor recommendations, as it aligns with Nextdoor's core DNA.

Q:Update on the build-out of programmatic capabilities, including on-platform and off-platform efforts.

A:The supply-side platform integration was completed earlier this year, and testing with DSPs is ongoing. An off-platform deal with Yahoo allows advertisers to target Nextdoor audiences via Yahoo's DSP. Programmatic complements direct sold inventory and is expected to yield benefits in the coming months.

Q:Impact of reduced alerts and notifications on engagement and differences in trends for users coming from alerts versus entering the app organically.

A:Reduced notifications have led to more effective alerts, contributing to revenue growth. Third-party alerts (e.g., weather, traffic, earthquake) are effective in re-engaging lapsed users. The new alerts platform targets specific areas, improving relevance and user return frequency.

Q:Review of Unclear Management Responses

A:No questions were avoided or lacked clarity. Management provided detailed and specific responses to all questions.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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The earnings call presents a mixed picture. Financial performance shows modest revenue growth and improved EBITDA margins, but challenges remain with large advertiser sales and user engagement. The Q&A section highlights management's optimism and progress in platform development, yet lacks specific timelines or metrics. The share repurchase is positive, but restructuring costs and ongoing losses are concerns. Overall, the sentiment is balanced, leading to a neutral prediction.

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